Cook Children's Health Care System and S.W. and J.W., Individually and on Behalf of Their Minor Child, J.W. v. Nocona General Hospital ( 2018 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-17-00128-CV
COOK CHILDREN’S HEALTH APPELLANTS
CARE SYSTEM AND S.W. AND
J.W., INDIVIDUALLY AND ON
BEHALF OF THEIR MINOR CHILD
J.W.
V.
NOCONA GENERAL HOSPITAL APPELLEE
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FROM THE 97TH DISTRICT COURT OF MONTAGUE COUNTY
TRIAL COURT NO. 2016-0481M-CV
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MEMORANDUM OPINION1
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I. INTRODUCTION
In this interlocutory appeal, Appellants Cook Children’s Health Care
System (Cook Children’s) and S.W. and J.W.,2 individually and on behalf of their
1
See Tex. R. App. P. 47.4.
minor child J.W., challenge the trial court’s order granting Appellee Nocona
General Hospital’s (Hospital) plea to the jurisdiction.3 Appellants assert that
Texas Local Government Code section 271.152 waives the Hospital’s immunity
from Appellants’ suit. The dispositive issue we address in this appeal is whether
the Nocona General Hospital Health Benefit Plan (the Plan) meets the statutory
definition of a “contract subject to this subchapter” as required to trigger a waiver
of immunity under section 271.152.4 See Tex. Loc. Gov’t Code Ann. § 271.152
(West 2016); see also id. § 271.151(2) (West 2016) (setting forth definition of
“contract subject to this subchapter”). Because we hold that the Plan does meet
the requisite statutory definition of a “contract subject to this subchapter” and that
section 271.152 waives the Hospital’s immunity from Appellants’ suit, we will
reverse the trial court’s order granting the Hospital’s plea to the jurisdiction
concerning Appellants’ breach-of-contract claim and remand that claim to the trial
court.
II. FACTUAL AND PROCEDURAL BACKGROUND
S.W. was an employee of the Hospital. Employees of the Hospital could
elect to pay premiums to participate in the Plan. S.W. elected to, and did, pay
Hereinafter, our references to J.W. refer to S.W.’s and J.W.’s minor son.
2
3
See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) (West Supp. 2017)
(authorizing interlocutory appeal from grant of plea to the jurisdiction by
governmental unit).
4
The parties conceded and agreed on this issue during oral argument.
2
premiums to participate in the Plan. S.W.’s minor son J.W. was a “covered
person” as defined by the Plan. The Plan was signed by the CEO of the
Hospital, Lance Meekins, and is contained in the record before us.
The Hospital is the administrator of the Plan, but the Hospital hired a third-
party administrator, Group Resources, to serve as the administrative-service
agent and as the claims-paying agent. The Hospital’s contract with Group
Resources also was signed by Meekins as CEO of the Hospital and is contained
in the record before us. The Hospital purchased excess-loss, reimbursement
insurance from Fidelity Security Life Insurance Company (FSL) for benefits to be
paid under the Plan in excess of $50,000. The Hospital’s contract with FSL was
signed by Meekins as CEO of the Hospital and is contained in the record before
us.
J.W. sustained very serious injuries in an all-terrain vehicle (ATV) accident.
He was taken to the Hospital and subsequently transported by air ambulance to
Cook Children’s. Cook Children’s provided medical services to J.W. and
submitted a claim for payment to the Plan as assignee of the rights of J.W.
Group Resources denied the claim submitted by Cook Children’s under the
“illegal activity exclusion” of the Plan.5 Appellants filed this suit against the
Hospital, FSL, and Group Resources alleging breach-of-contract claims—and
5
A letter from Group Resources to S.W. stated that the illegal-activity
exclusion of the Plan applied because J.W. was not properly supervised while
riding the ATV and had not been wearing a helmet or goggles, all of which were
required by law.
3
other claims—and seeking to recover benefits allegedly owed to them under the
Plan.
The Hospital filed a plea to the jurisdiction asserting that it possessed
governmental immunity from Appellants’ breach-of-contract claim because there
“is no waiver of immunity for breach of contract under Tex. Loc. Gov’t Code Ch.
271.” Appellants filed a response. The trial court conducted a hearing and
signed an order granting the Hospital’s plea to the jurisdiction on Appellants’
breach-of-contract claim because the Plan “is not a contract for which immunity is
waived under Tex. Loc. Gov’t Code Ch. 271.” Appellants then perfected this
interlocutory appeal.
III. THE TRIAL COURT ERRED BY GRANTING THE
HOSPITAL’S PLEA TO THE JURISDICTION
In their first issue, Appellants argue that they pleaded and proved the
requisites necessary to establish a waiver of the Hospital’s immunity under Texas
Local Government Code section 271.152 and that, accordingly, the trial court
erred by granting the Hospital’s plea to the jurisdiction.
A. Standard of Review
Governmental immunity has two components: immunity from liability and
immunity from suit. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). A
governmental entity that enters into a contract waives its immunity from liability
but retains its immunity from suit unless its immunity from suit is specifically
waived by the legislature. Id. Governmental immunity from suit deprives the trial
4
court of subject-matter jurisdiction. Tex. Dep’t of Parks & Wildlife v. Miranda, 133
S.W.3d 217, 224 (Tex. 2004).
Whether a court has subject-matter jurisdiction is a question of law, and we
review the trial court’s grant or denial of a plea to the jurisdiction de novo. Id.
When reviewing a grant or denial of a plea to the jurisdiction, we consider the
plaintiff’s pleadings and any evidence relevant to jurisdiction without weighing the
merits of the claim. Cty. of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002);
see also Miranda, 133 S.W.3d at 228.
A plea to the jurisdiction may challenge either the pleadings or the
existence of jurisdictional facts. Miranda, 133 S.W.3d at 226‒27. When a plea
to the jurisdiction challenges a plaintiff’s pleadings, we consider whether the
pleader has alleged sufficient facts to demonstrate the court’s subject-matter
jurisdiction over the suit, construing the pleadings liberally in favor of the plaintiff
and looking to the pleader’s intent. Id.; see City of Waco v. Kirwan, 298 S.W.3d
618, 621 (Tex. 2009). If a plea to the jurisdiction challenges the existence of
jurisdictional facts, we consider relevant evidence submitted by the parties when
necessary to resolve the jurisdictional issues that have been raised. Miranda,
133 S.W.3d at 227. If the relevant evidence is undisputed or fails to raise a fact
question on the jurisdictional issue, the trial court rules on the plea to the
jurisdiction as a matter of law. Id. at 228.
5
B. Appellants’ Pleadings and Jurisdictional Evidence
Appellants’ third amended original petition set forth the facts forming the
basis of their claims. In addition to pleading the facts set forth above, the petition
alleged the following:
11. . . . JW was a “covered person” as defined by the Nocona
General Hospital Employee Benefit Plan (Exh A, page 20); and the
Fidelity Security Policy. (Exh C, page 4) JW, SW[,] and their minor
son were at least, third party beneficiaries of the Fidelity Security
policy. Cook is an assignee of the rights of JW. (Exh D)
....
19. . . . The Nocona General Hospital is a local governmental entity
with limited boundaries. The enabling law gives express permission
for the Nocona General Hospital to be sued[.] (Tex. Special District
Local Laws Code 1081.001, et seq.)
The petition then pleads a breach-of-contract claim against the Hospital as
follows:
b. Breach of Contract.
34. Plaintiffs will show that defendants’ conduct constitutes a
breach of contract, specifically the Nocona General Hospital
Employee Benefit Plan and the FSL insurance policy. The
insured/depend[e]nt, JW, who received the necessary care and
treatment was covered under the Plan[,] and defendants agreed and
promised to timely pay benefits for the medical treatment Plaintiff
provided to JW. However, defendants failed to pay the benefits not
only timely but at all, thereby breaching the contracts set out in
Exhibits A and C. Defendants’ breach is a direct, proximate, and
producing cause of economic damages to Plaintiffs in the amount of
at least $750,000.00, together with statutory interest and penalties
as prescribed by law.
35. Plaintiffs, SW and JW[,] provided payments and services
pursuant to a signed agreement with Nocona General Hospital and
Nocona General Hospital Employee Benefit Plan. Nocona General
6
Hospital and Nocona General Hospital Employee Benefit Plan
agreed to provide employee benefits pursuant to the signed
contract. The contract has provisions for appeal of disrupted claims.
It gives permission to sue and collect if benefits are not paid.
Plaintiffs complied with all conditions precedent.
36. The enabling statu[t]e for these defendants gives express
permission for the Nocona General Hospital to be sued. (Tex.
Special District Local Laws Code 1081.001, et seq.)
37. Plaintiffs will show that all conditions precedent have been
fully performed by Plaintiffs for recovery of these medical expenses
under said contracts and defendants have waived any entitlement to
a contractual discount for the services provided to its patient JW for
defendants’ unilateral breach of the covenants and conditions
therein.
38. Plaintiffs will show that all medical treatment rendered to
patient JW was reasonable and necessary for the care and
treatment and the charges for said care and treatment were
reasonable charges in the areas those services were rendered.
Plaintiffs sue defendants for their unilateral breach of the
Plan/Agreement and the remainder of the usual and customary
charges in the amount of at least $750,000.00, together with
statutory interest and penalties as prescribed by law.
39. Nocona General Hospital and Nocona General Hospital
Employee Benefits Plan were performing a proprietary function in
serving as a conduit for health insurance benefits. The provision of
health insurance benefits was not a governmental function. Nocona
General Hospital and Nocona General Hospital Employee Benefit
Plan received services and premium payments for the insurance
benefits and forwarded those payments to Group Resources, FSL[,]
and the agents of Group Resources and FSL.
Appellants attached the following documents to their third amended original
petition:
A. Plan document of Nocona General Hospital Employee Benefit
Plan. [The “Plan” executed by the Hospital and distributed to the
Hospital’s employees.]
7
[No exhibit B listed.]
C. Fidelity Security Life Insurance Company Policy. [The excess-
loss, reimbursement contract executed by the Hospital with Fidelity
“in consideration of [the Hospital’s] Application and the payment of
premiums.”]
D. Assignment of Benefits to Cook Children[’]s[.]
E. The claim file provided by Group Resources, Inc.
F. Group Resources[’] Denial Letter.
G. Notice letter from Rickey J. Brantley to Defendants requesting
status of appeal.
H. Group Resources[’] responses to requests for information on
appeal.
I. Nocona Entities’ Response to Request for Admissions.
Appellants attached some of these same documents to their response to the
Hospital’s plea to the jurisdiction, along with excerpts from Meekins’s deposition
and relevant provisions of the Texas Local Government Code and the enabling
legislation regarding the Hospital.
C. The Law Concerning Waiver of Immunity Under Section 271.152
Local government code section 271.152 creates a waiver of governmental
immunity from suit for certain breach-of-contract claims brought against
qualifying local governmental entities:
A local governmental entity that is authorized by statute or the
constitution to enter into a contract and that enters into a contract
subject to this subchapter waives sovereign immunity to suit for the
purpose of adjudicating a claim for breach of contract, subject to the
terms and conditions of this subchapter.
8
Tex. Loc. Gov’t Code Ann. § 271.152; see La Joya Indep. Sch. Dist. v. Villarreal,
No. 13-13-00325-CV, 2014 WL 3050484, at *3 (Tex. App.—Corpus Christi July 3,
2014, pet. denied) (mem. op.).
Section 271.152’s waiver of immunity from suit applies to a breach-of-
contract claim when the following three elements are established: (1) the party
against whom the waiver is asserted must be a “local governmental entity” as
defined by section 271.151(3); (2) the entity must be authorized by statute or the
constitution to enter into contracts; and (3) the entity must in fact have entered
into a “contract subject to this subchapter,” as that phrase is defined by local
government code section 271.151(2). See Tex. Loc. Gov’t Code Ann. § 271.152;
Zachry Constr. Corp. v. Port of Houston Auth. of Harris Cty., 449 S.W.3d 98,
109–10 (Tex. 2014); City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex.
2011); City of Denton v. Rushing, 521 S.W.3d 88, 92–93 (Tex. App.—Fort Worth
2017, pet. filed). In order for a contract to meet the statutory definition of a
“contract subject to this subchapter,” as that term is defined in local government
code section 271.151(2), the contract must (1) be in writing, (2) state the
essential terms of the agreement, (3) provide for goods or services (4) to the
local governmental entity, and (5) be executed on behalf of the local
governmental entity. See Tex. Loc. Gov’t Code Ann. § 271.151(2)(A) (defining
“[c]ontract subject to this subchapter”); Williams, 353 S.W.3d at 134–35. Section
251.152’s statutory waiver of immunity from suit is not dependent on the outcome
of the breach-of-contract suit, though it does require a showing of a substantial
9
claim that meets the statutory requisites necessary to trigger the waiver. Zachry
Constr. Corp., 449 S.W.3d at 109–10. A substantial claim is shown when the
claimant pleads facts with some evidentiary support that constitute a claim for
which immunity is waived. Id.
D. Analysis
In their first issue, Appellants identify and discuss how their pleadings and
jurisdictional evidence support each of the elements necessary to trigger section
271.152’s waiver of immunity and each of the statutory requisites necessary to
show that the Plan is a “contract subject to this subchapter.” Although Appellants
briefed each of the statutory requisites necessary to trigger section 271.152’s
waiver of immunity, the Hospital agreed in its brief and during oral argument that
the parties’ disagreement on appeal is limited to whether the Plan meets the
statutory definition of a “contract subject to this subchapter.” Thus, we focus the
analysis of our opinion on the Hospital’s three contentions that it does not. But
first, we make it clear, however, that in conducting our de novo review of the trial
court’s ruling on the Hospital’s plea to the jurisdiction, we have reviewed the
record before us and have ascertained that Appellants pleaded facts and
provided some evidentiary support (in documents attached to their third amended
original petition and response to the Hospital’s plea to the jurisdiction) showing
each requisite—even those not disputed by the Hospital on appeal—necessary
to trigger application of section 271.152’s waiver of immunity.
10
Concerning the first, second, and a portion of the third elements necessary
to trigger application of section 271.152’s waiver of immunity, the parties agree
and—after reviewing the record before us, including the executed copy of the
Plan and Meekins’s deposition testimony—we also agree, that the Hospital is a
local governmental entity that is authorized by statute or the constitution to enter
into a contract and that the Plan constitutes a written contract entered into by the
Hospital and executed on the Hospital’s behalf by its CEO. See Tex. Loc. Gov’t
Code Ann. §§ 271.151(3)(C), 271.152; Harris Cty. Hosp. Dist. v. Tomball Reg’l
Hosp., 283 S.W.3d 838, 842 (Tex. 2009) (stating that “[h]ospital districts have
such [governmental] immunity”); see also Tex. Spec. Dist. Code Ann.
§§ 1081.001–.307 (West Supp. 2017) (addressing Nocona General Hospital
District), § 1081.115 (West Supp. 2017) (providing that Nocona General Hospital
District may sue and be sued). To the extent the Hospital argues in its brief that
the Hospital District’s enabling legislation does not waive immunity from suit, we
agree. See, e.g., Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex.
Political Subdivisions, 212 S.W.3d 320, 324 (Tex. 2006) (explaining that “[b]y
entering into a contract the State waives its immunity from liability but not its
immunity from suit. . . . Thus, . . . immunity from suit bars a remedy until the
[l]egislature consents to suit”). It is section 271.152 that Appellants contend, and
that we ultimately hold, waives the Hospital’s immunity from suit in this case, not
the Hospital District’s enabling legislation.
11
We also note that the breach-of-contract damages alleged by Appellants
against the Hospital—at least $750,000 in economic damages for medical
expenses covered by the Plan that were incurred by J.W. as a result of the ATV
accident—constitute a claim for damages that is within the scope of section
271.153’s limitation on damages recoverable against a local governmental unit
for breach of contract when immunity is waived by section 271.152. See, e.g.,
Zachry Constr. Corp., 449 S.W.3d at 108 (reconciling alleged conflict between
Kirby Lake and Tooke by clarifying that section 271.152’s “subject to” language
limits the amount owed by a local governmental entity on a contract once its
liability for breach of contract has been established so long as the claimant seeks
damages recoverable under section 271.153 and citing Kirby Lake Dev., Ltd. v.
Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex. 2010), and Tooke, 197
S.W.3d at 346).
Because Appellants have met their burden with respect to the first, second,
and a portion of the third discussed elements of a substantial breach-of-contract
claim—that the Hospital is a local governmental entity that is authorized by
statute or the constitution to enter into a contract, that the Plan is a written
contract, that the Plan was executed on behalf of the Hospital by its CEO, and
that Appellants have pleaded breach-of-contract damages against the Hospital
that fall within the limitation on damages available under section 271.153—and
because the Hospital agrees that the dispute on appeal centers on whether the
Plan meets the statutory definition of a “contract subject to this subchapter,” we
12
do not discuss these other requisites further. See Zachry Constr. Corp., 449
S.W.3d at 109–10 (explaining that when the claimant pleads facts with some
evidentiary support that constitute a claim for which immunity is waived, the
claimant has shown a substantial claim); McMahon Contracting, L.P. v. City of
Carrollton, 277 S.W.3d 458, 464 (Tex. App.—Dallas 2009, pet. denied) (holding
plaintiffs met their burden with respect to establishing requisites of a section
271.152 waiver of immunity for a governmental entity in a breach-of-contract
suit).
Turning to the Hospital’s contentions on appeal, in a total of four pages of
argument in their brief, the Hospital argues that Appellants failed to establish that
the Plan is a “contract subject to this subchapter” under section 271.151’s
definition of that term. The Hospital argues that the Plan does not qualify as a
“contract subject to this subchapter” for three reasons: because it is not an
agreement by Appellants (S.W. and J.W., individually and on behalf of J.W., and
Cook Children’s), because it is not an agreement to provide services to the
Hospital, and because it contains no essential terms.6 Finally, the Hospital
argues that the case of United Healthcare Choice Plus Plan for City of Austin
Employees v. Lesniak, No. 03-15-00309-CV, 2015 WL 7951630 (Tex. App.––
6
The Hospital does not segregate these contentions but argues them
jointly in its brief. Although we address these arguments individually, the
analysis of them is somewhat overlapping, and our disposition of each contention
must be viewed in light of our entire opinion.
13
Austin Dec. 1, 2015, pet. denied) (mem. op.), controls the outcome here. We
address the Hospital’s contentions.
1. The Hospital’s Contention that the Plan is not an
Agreement by Appellants
The Hospital argues that the Plan does not meet the statutory definition of
a “contract subject to this subchapter” because it is not an agreement by
Appellants (S.W. and J.W., individually and on behalf of J.W., and Cook
Children’s) to provide services to the Hospital. The first part of the Hospital’s
contention—that the Plan is not a “contract subject to this subchapter” because it
is not an agreement by Appellants—although not so phrased by the Hospital, is a
challenge to Appellants’ standing. That is, the Hospital contends that only a
party, i.e., a signatory, to a contract with the Hospital, possesses standing to sue
under section 271.152’s waiver of immunity.
The Texas Supreme Court has rejected the Hospital’s argument. See
Williams, 353 S.W.3d 145–46. In Williams, the Texas Supreme Court held that
section 271.152’s waiver of immunity applied to breach-of-contract suits filed by
third-party beneficiaries of a “contract subject to this subchapter.” Id. at 145–46.
The supreme court in Williams further held that firefighters—as third-party
beneficiaries of a Meet and Confer Agreement (MCA) executed between the
Houston Professional Fire Fighters Association and the City of Houston—had
standing to sue the City for the City’s alleged breach of the MCA. Id. Courts of
appeals across Texas have held likewise—third-party beneficiaries of contracts
14
meeting the statutory definition of a “contract subject to this subchapter” as set
forth in section 271.151(2) possess standing to sue a local governmental entity
whose immunity from suit is waived by section 271.152. See, e.g., La Joya
Indep. Sch. Dist., 2014 WL 3050484, at *5–6 (recognizing that breach-of-contract
claim of third-party beneficiary falls within section 271.152’s waiver of immunity
when other requisites necessary to trigger waiver are met); S. Coast Spine &
Rehab. P.A. v. Brownsville Indep. Sch. Dist., No. 13-11-00270-CV, 2014 WL
1789546, at *5 (Tex. App.—Corpus Christi Apr. 30, 2014, no pet.) (holding that
“BISD waived its immunity from suit by entering into the benefits plan” and that
“South Coast has a right to sue [BISD] as an assignee that was intended under
the employee benefits plan”); Galveston Indep. Sch. Dist. v. Clear Lake Rehab.
Hosp., LLC, 324 S.W.3d 802, 807 (Tex. App.—Houston [14th Dist.] 2010, no
pet.) (holding that “when a governmental entity and a contracting party enter into
a contract [to provide insurance] . . . and denominate a third-party beneficiary of
that contract, the third-party beneficiary’s claim for breach of contract falls within
the waiver of immunity authorized under section 271.152”).
We next address whether S.W.—individually and as next friend of her
minor son J.W. and a “covered person” under the Plan7—is “at least” a third-party
beneficiary of the Plan. The law is well-settled that third parties have standing to
7
The Plan defines “Dependent” as including, in part, an employee’s spouse
and an employee’s child who is less than twenty-six years of age. “Covered
Person” is defined as meaning the employee or a Dependent for whom coverage
is provided by the Plan.
15
recover under a contract that is clearly intended for their direct benefit. First
Bank v. Brumitt, 519 S.W.3d 95, 103 (Tex. 2017); Williams, 353 S.W.3d at 145;
Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002). When deciding whether the
parties to an unambiguous contract intended to create a third-party beneficiary,
courts must look solely to the contract’s language. Brumitt, 519 S.W.3d at 107;
see Stine, 80 S.W.3d at 590 (explaining that to determine whether a contract is
intended for the direct benefit of a third party, we look to the entire agreement,
giving effect to all its provisions).
The agreement, however, need not have been executed solely to benefit
the noncontracting party in order to confer third-party-beneficiary status. Stine,
80 S.W.3d at 591. Instead, the contract must only include “a clear and
unequivocal expression of the contracting parties’ intent to directly benefit a third
party,” and any implied intent to create a third-party beneficiary is insufficient.
Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011); MCI Telecomms. Corp. v.
Tex. Utils. Elec. Co., 995 S.W.2d 647, 651–52 (Tex. 1999). Nonetheless, to
clearly express the contracting parties’ intent to directly benefit a third party, the
agreement need not utilize particular phraseology, such as “third-party
beneficiary” or similar magic words. See Stine, 80 S.W.3d at 590–91. A contract
that benefits a third party only incidentally, however, rather than being clearly
intended for the direct benefit of the third party, is not enforceable by the
incidental beneficiary. Sharyland Water Supply Corp. v. City of Alton, 354
S.W.3d 407, 412 (Tex. 2011); MCI, 995 S.W.2d at 651–52.
16
Appellants point out that the Hospital admitted that S.W. and her son J.W.,
as “covered person[s],” were intended third-party beneficiaries of the Plan. In
response to requests for admission, the Hospital made the following admissions:
Nocona admits that it established and maintains the Nocona
General Hospital Employee Health Benefit Plan for the benefit of its
employees. Nocona admits that it could not have this plan but for re-
insurance as set forth in the attached contract. Nocona also admits
that employees benefitted from the attached contract by participating
in the Plan.
Appellants also point out that the Plan provides8
reimbursement for covered charges incurred as a result of Medically
Necessary treatment for Illness or Injury of the Company’s eligible
Employees and their eligible Dependents.
....
TO ALL EMPLOYEES:
We are all aware of the financial disaster that a family may
experience as a result of a serious or prolonged Illness or Accident.
The medical benefits available under the Nocona General Hospital
Employee Health Benefit Plan (the Plan) and described in this Plan
document and summary plan description (SPD) are designed to
provide some protection for you and your family against such
disaster.
....
8
Neither party claims the Plan is ambiguous; we agree that it is not. See
Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) (stating that when contracts
are so worded that they can be given a certain or definite legal meaning or
interpretation, then they are not ambiguous, and the court will construe them as a
matter of law); see also Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d
857, 861 (Tex. 2000) (stating that court will enforce an unambiguous contract “as
written”).
17
. . . We are pleased to offer the benefits under this Plan for
you and your covered family members as an expression of our
appreciation for your efforts on behalf of our Company.
....
REQUIRED EMPLOYEE CONTRIBUTIONS:
Employees do contribute toward the cost of Employee and
Dependent Coverage.
The amount that Employees contribute is calculated by the Plan
Administrator and is a portion of the cost of coverage under the
Plan.
Appellants’ third amended original petition, as set forth and quoted above,
pleaded that S.W. and her minor son J.W. were “at least” third-party beneficiaries
of the Plan. The Hospital’s CEO testified that the Hospital took money out of
employees’ paychecks to fund the Plan, that the Plan was a benefit it provided to
employees, that the Plan was implemented in part to assist the Hospital in
recruiting employees, that premiums for participation in the Plan were deducted
by the Hospital from employees’ paychecks, that S.W. participated in the Plan,
that J.W. was a covered person under the Plan, and that S.W. had paid all of her
premiums under the Plan via a paycheck deduction.
Appellants’ jurisdictional evidence, including the Hospital’s own admissions
and the express language of the Plan, established that S.W. and J.W. as
“covered person[s]” are “at least” intended third-party beneficiaries of the Plan.
Indeed, if the Hospital did not enter into the Plan with the intent to directly benefit
Plan participants like S.W. and J.W., then the Plan had no purpose whatever.
18
See Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc., 348 S.W.3d 894, 900–
01 (Tex. 2011) (holding ART and TCI were third-party beneficiaries and noting
that if “[i]f Dynex and Basic did not intend the Commitment to benefit ART and
TCI directly, then the Commitment had no purpose whatever”).
To the extent the Hospital’s contention that the Plan is not a “contract
subject to this subchapter” because it is not an agreement “by Appellants”
includes the contention that the Plan is not an agreement by Cook Children’s as
an Appellant, we next address this contention. Appellants pleaded, and the
Hospital does not dispute, that Cook Children’s is the assignee of J.W.’s benefits.
In fact, the assignment to Cook Children’s is attached to Appellants’ third
amended original petition as exhibit D. We take this pleaded fact, supported by
Appellants’ jurisdictional evidence, as true. See Miranda, 133 S.W.3d at 228.
Section 271.152 waives sovereign immunity for suits brought by assignees of
those entitled to enforce a contract with a local governmental entity under
subchapter I. See First-Citizens Bank & Tr. Co. v. Greater Austin Area
Telecomms. Network, 318 S.W.3d 560, 568–69 (Tex. App.—Austin 2010, no
pet.). Therefore, we reject the contention that Cook Children’s—as the assignee
of the benefits owed to S.W.’s son J.W.—lacks standing to bring a breach-of-
contract suit against the Hospital under the waiver of immunity set forth in section
271.152.
Having determined that S.W., individually and as next friend of J.W., and
Cook Children’s possess standing to assert a breach-of-contract claim against
19
the Hospital under the statutory waiver of immunity set forth in section 271.152,
we reject the Hospital’s contention that the Plan is not a “contract subject to this
subchapter” because it is not an agreement by Appellants. Appellants pleaded
and presented jurisdictional evidence establishing their standing to bring suit to
enforce the Plan although they were not signatories to it.
2. The Hospital’s Contention that the Plan Is Not an
Agreement for Appellants to Provide Services to the Hospital
The Hospital also contends that the Plan does not meet the statutory
definition of a “contract subject to this subchapter” because it is not an
agreement to provide services to the Hospital; that is, the Hospital contends that
“the Plan contains no provisions or language whatsoever where [Appellants]
agree to provide any goods or services of any kind to the Hospital.” And the
Hospital asserted in its brief and at oral argument that because “the Plan in this
case contains no agreements to provide employment or other services to the
Hospital and does not identify any performance that covered persons must
complete to be entitled to benefits,” section 271.152’s waiver of immunity does
not apply.9 The plain language of the statute, however, as well as the
construction of it by Texas courts, is contrary to the Hospital’s position.
9
During oral argument, counsel for the Hospital argued that the Plan did
not constitute a contract under chapter 271 because “it doesn’t contain the
essential term of an agreement by the claimant for the claimant to provide
services to the governmental entity.” The Hospital’s counsel agreed that if the
job duties of each of the 100 to 200 employees of the Hospital constituting the
services provided by each of them to the Hospital were described in the Plan, it
“might very well be a contract under 271.”
20
The statute provides that immunity is waived for a breach-of-contract claim
when a local governmental entity that is authorized by statute or the constitution
to enter into a contract in fact does enter into a “contract subject to this
subchapter.” Tex. Loc. Govt. Code Ann. § 271.152. And a “contract subject to
this subchapter” is “a written contract stating the essential terms of the
agreement for providing goods or services to the local governmental entity that is
properly executed on behalf of the local governmental entity.” Id. § 271.151.
Juxtaposing the plain language of these two statutory provisions, no requirement
exists—as asserted by the Hospital—that the “claimant” in the breach-of-contract
suit be the person or the entity providing services to the governmental entity in
order for a contract to meet the definition of a “contract subject to this
subchapter.” To the contrary, as set forth above, courts recognize that section
271.152 waives a governmental entity’s immunity from suit when a breach-of-
contract claim is brought by a third-party beneficiary or an assignee of a “contract
subject to this subchapter.” See, e.g., Basic Capital Mgmt., Inc., 348 S.W.3d at
900–01; First-Citizens Bank & Tr. Co., 318 S.W.3d at 568–69.
And, likewise, juxtaposing the plain language of sections 271.151 and
271.152, no requirement exists—as asserted by the Hospital—that in order to
qualify as a “contract subject to this subchapter,” a contract actually be the
service contract; instead, to be a “contract subject to this subchapter,” a contract
must include essential terms of a service provided to the governmental entity,
even if that service is not the primary purpose of the contract. See Lubbock Cty.
21
Water Control & Improvement Dist. v. Church & Akin, L.L.C., 442 S.W.3d 297,
302 (Tex. 2014) (“We also agree with Church & Akin that the agreement to
provide services to the governmental entity ‘need not be the primary purpose of
the agreement.’”); Kirby Lake Dev., Ltd., 320 S.W.3d at 839 (affirming court of
appeals’s rejection of governmental entity’s argument that agreement did not
constitute provision of services to entity); see also Byrdson Servs., LLC v. S. E.
Tex. Reg’l Planning Comm’n, 516 S.W.3d 483, 485 (Tex. 2016) (reversing court
of appeals’s decision that chapter 271 did not apply because Planning
Commission’s contracts with Byrdson did not state essential terms “for providing
goods or services to the local governmental entity”); Ben Bolt-Palito, 212 S.W.3d
at 327 (explaining that “the statute’s legislative history indicates that, by enacting
section 271.152, the [l]egislature intended to loosen the immunity bar so ‘that all
local governmental entities that have been given or are given the statutory
authority to enter into contracts shall not be immune from suits arising from those
contracts.’” (quoting House Comm. on Civ. Practices, Bill Analysis, Tex. H.B.
2039, 79th Leg., R.S. (2005))).
But, nonetheless, even if the Hospital is correct that to qualify as a
“contract subject to this subchapter” the Plan must state the essential terms of an
agreement for S.W. to provide services to the Hospital, the Plan does contain
those essential terms. The Plan is seventy-four pages long. As set forth above,
the Plan states that the Hospital is “pleased to offer the benefits under this Plan
for you and your covered family members as an expression of our appreciation
22
for your efforts on behalf of our Company” and is “for the benefit of eligible
Employees and their eligible Dependents.” An Employee is any person
employed on a regular basis by the “Company” in the conduct of the
“Company’s” regular business who is regularly scheduled to work at least thirty-
two hours per week and who is classified as a common-law Employee.
Employees are required to contribute toward the cost of Employee and
Dependent coverage. Such required contributions are subtracted from the
Employee’s gross pay each pay period. The Plan provides that it “is
administered by the Plan Administrator [which is the Hospital], with Group
Resources, an Administrative Service Agent, acting as [a] Claims Paying agent.”
Administrative Service Agent is defined as “the firm providing administrative
services to the Plan Administrator [the Hospital] in connection with the operation
of the Plan, such as maintaining current eligibility data, billing, processing and
payment of Claims[,] and providing the Plan Administrator with any other
information deemed necessary. Group Resources is the Administrative Services
Agent for the Plan.”
Thus, contrary to the Hospital’s assertion, the Plan does contain the
essential terms of services to be provided to the Hospital by Employees. The
essential terms of the services to be provided by its Employees include being
regularly scheduled to work at least thirty-two hours per week, and in exchange
for performing the service of at least thirty-two hours per week of work or “efforts
on behalf of the [Hospital]” and for consideration in the form of payment of
23
premiums deducted from their paychecks, Employees may contract with the
Hospital as the Plan Administrator for health-insurance benefits as specifically
set forth under the detailed terms of the Plan. Although these services by the
Employee are not the primary purpose of the Plan, the Plan does set forth the
essential terms for Employees providing services to the Hospital—a regular work
schedule of at least thirty-two hours per week, employment on the effective date
of the Plan or after a ninety-day waiting period, and continued employment along
with premium payments.
We reject the Hospital’s contention that the Plan is not a “contract subject
to this subchapter” based on the alleged deficiency of failing to state the essential
terms of the agreement for providing services to the local governmental entity.
Appellants pleaded and presented jurisdictional evidence that the Plan does
state essential terms of an agreement for Employees like S.W. to provide
services to the Hospital.
3. The Hospital’s Contention that the Plan Contains No Essential Terms
Finally, the Hospital argues that the Plan does not meet the statutory
definition of a “contract subject to this subchapter” because it “clearly contains no
essential terms.” Any written, authorized contract that states the essential terms
of an agreement for providing services to the governmental entity triggers the
waiver of immunity under chapter 271. Lubbock Cty. Water Control &
Improvement Dist., 442 S.W.3d at 302. There is no statutory definition for
“essential terms,” but the Supreme Court of Texas has characterized “essential
24
terms” as, among other things, “the time of performance, the price to be paid,
and the service to be rendered.” Williams, 353 S.W.3d at 138–39 (internal
quotation omitted); see also Kirby Lake Dev., Ltd., 320 S.W.3d at 838 (stating
that a written contract states the essential terms when it outlines the names of
the parties, the property at issue, and the parties’ “basic obligations”). Courts
consider each contract separately on a case-by-case basis to determine its
essential terms. See T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218,
221 (Tex. 1992). The Plan sets forth the essential terms of an employee’s
eligibility to participate in the Plan (as discussed above) and the Hospital’s
obligations when it accepts an employee’s premiums by deducting monies from
an employee’s paycheck. Thus, the Plan addresses the essential terms of time
of performance, price to be paid, and service to be rendered.
Having determined that the Plan sets forth the essential terms for the
Hospital’s provision and administration of the Plan, S.W.’s payment for the Plan
via payroll deductions, and the services to be rendered under the Plan, we reject
the Hospital’s contention that the Plan is not a “contract subject to this
subchapter” because it “clearly contains no essential terms.” Appellants pleaded
and presented jurisdictional evidence that the Plan does contain its essential
terms.
4. The Hospital’s Reliance on Lesniak
The primary case relied upon by the Hospital in its brief and during oral
argument is United Healthcare Choice Plus Plan for City of Austin Employees v.
25
Lesniak, 2015 WL 7951630, at *1–3. In Lesniak, the City established a self-
funded insurance plan to provide medical benefits to its eligible employees and
contracted with United HealthCare Services, Inc. to administer the plan. Id. at *1.
Lesniak and his daughter were covered under the plan, and Lesniak paid
premiums to the plan for this coverage. Id. Lesniak sued the City and the Plan
for breach of contract, alleging that they had wrongfully denied benefits for a
portion of his daughter’s treatment at an inpatient facility. Id. The City and the
Plan filed a joint plea to the jurisdiction, which the trial court denied.
On appeal, the Austin Court of Appeals addressed the City and Plan’s
contention that chapter 271 did not apply “because Lesniak does not provide any
services to the City directly pursuant to the Plan.” Id. at *2. Because the Plan
Documents submitted by the City and the Plan in support of their plea to the
jurisdiction could not be construed as containing an agreement by Lesniak to
provide employment or other services to the City or identify any performance that
covered persons must complete to be entitled to benefits, because “the record
contains no other contracts stating the essential terms of any services to be
provided by any party, and [because] Lesniak’s pleadings do not allege the
existence of any other contract that the City and the Plan have breached except
for these Plan Documents,” the Austin Court of Appeals held that chapter 271 did
not apply to waive the City’s immunity from suit. Id. at *3. The Austin Court of
Appeals was careful, however, to premise its holding on the limited record before
it, stating that “[o]n this record, we conclude that the contracts under which
26
Lesniak sues the City and the Plan for breach of contract do not fall within the
limited waiver of immunity” in chapter 271. Id. at *3.
Contrary to the facts in Lesniak, however, the Plan here does identify
performance or services covered persons must complete to be entitled to
benefits—they must be routinely assigned to work at least thirty-two hours per
week, be employed on the date the Plan was executed or after a ninety-day
waiting period, and pay premiums via paycheck deductions. And the record
before us, unlike the record in Lesniak, contains not only the Plan but also two
other contracts: the Hospital’s contract with FSL and the Hospital’s contract with
Group Resources, which both state essential terms for providing services to the
Hospital. Also unlike Lesniak’s pleadings, Appellants’ pleadings do plead
breach-of-contract claims against the Hospital for breach of the Plan and for
breach of the FSL policy. Thus, because the record before us contains pleadings
and jurisdictional evidence absent from the record in Lesniak, we apply the law to
the record that is before us and reach a different result.
E. Summary
In summary, Appellants met their burden of pleading facts and providing
some evidentiary support showing the elements of a substantial breach-of-
contract claim necessary to trigger a waiver of immunity under chapter 271—that
the Hospital is a local governmental entity that is authorized by statute to enter
into a contract; that the Plan is a written contract; that the Plan states the
essential terms of the agreement for providing services to the Hospital; that the
27
Plan was properly executed on behalf of the Hospital; that Appellants have
pleaded breach-of-contract damages against the Hospital that fall within the
limitation on damages available under section 271.153; and that Appellants
possess standing to sue for breach of the Plan because they are “at least” third-
party beneficiaries of the Plan. See Zachry Constr. Corp., 449 S.W.3d at 109–10
(explaining that when the claimant pleads facts with some evidentiary support
that constitute a claim for which immunity is waived, the claimant has shown a
substantial claim). In other words, Appellants have met their burden with respect
to these elements or requisites of a section 271.152 waiver of immunity for a
governmental entity in a breach-of-contract suit. See McMahon Contracting,
L.P., 277 S.W.3d at 464. Accordingly, we sustain Appellants’ first issue.10
We also sustain Appellants’ fifth issue, arguing that the trial court erred by
granting the Hospital’s plea to the jurisdiction “[a]s to Plaintiffs’ additional tort
claims against the Hospital” because Appellant’s live pleading asserts no tort
claims against the Hospital.11
IV. CONCLUSION
Having sustained Appellants’ first and fifth issues, we reverse the trial
court’s order granting the Hospital’s plea to the jurisdiction concerning
10
Because we have sustained Appellants’ first issue and reversed the trial
court’s order, we need not address Appellants’ issues 2, 3, and 4 that raise
alternative grounds for reversal. See Tex. R. App. P. 47.1 (providing that
appellate court must address only issues necessary to disposition of appeal).
11
The Hospital’s brief contains no response to this issue.
28
Appellant’s breach-of-contract claims against the Hospital. We remand this case
to the trial court for further proceedings consistent with this opinion.
/s/ Sue Walker
SUE WALKER
JUSTICE
PANEL: WALKER, MEIER, and GABRIEL, JJ.
DELIVERED: April 5, 2018
29